OREANDA-NEWS. August 26, 2010. Crude-oil futures ended Wednesday in positive territory, despite a surprise increase in inventories and weak economic data that offered little hope for a surge in demand.

Crude for October delivery rose 89 cents, or 1.2%, to settle at USD 72.52/bbl on the NYMEX, after hitting an 11-week low on Tuesday. Earlier in the session, oil had posted an intraday low of USD 70.69/bbl, in line with our prediction that the market is rolling back towards the USD 70 mark.

Oil ended more than 1% higher Wednesday, rebounding from an 11-week low and five days of losses as the market shrugged off government data showing across-the-board builds in crude oil and product inventories last week. The market also got a lift from Wall Street, where all major indexes rose in late bargain hunting after being pummeled by weak housing data earlier.

Although disappointing economic data earlier weakened equities, they edged higher late in the day as a drop through a key technical level in the Standard & Poor's 500 index triggered technical buying.

The US Energy Information Administration said in its report that crude inventories rose 4.11 mn bbl in the week to August 20, dwarfing a forecast for a build of 200,000 bbl. However, crude oil inventories at the key Cushing, Oklahoma, delivery hub fell 779,000 bbl to 36.3 mn bbl, the only bullish feature in the weekly report. Gasoline inventories were 2.27 mn barrels higher, at odds with forecasts of a small drawdown. Distillate stocks increased by a higher than expected 1.76 mn bbl. In aggregate, commercial crude and product stocks rose to 1.139 bn bbl last week, topping the record weekly high of 1.13 bn bbl set in the week to August 13.

Oil futures got hammered early in the session as data showed sales of new US single-family homes slumped to the slowest pace on record in July. That came on top of a private sector report on Tuesday that sales of previously owned homes in the same month plunged to their slowest pace in 15 years. A separate government report showed that orders for long-lasting US manufactured goods, excluding transportation equipment, posted their biggest drop in 1.5 years in July.

Moving forward, despite yesterday’s relief rally, and even though we think oil looks oversold at this point, we still see precious few drivers for oil futures, which means we could see more downside today if today’s weekly jobless claims data are as bleak as may be expected. In the upshot, we could see more pressure on the USD 70 mark or even a breach of this resistance level.